COMMENT: TTIP – averting a train wreck

TTIP talks are in deep trouble. The best US and EU leaders can achieve this year is averting an outright train wreck. A comment by Iana Dreyer.

Photo credit: German government/Bergman

The real goal of US and EU leaders this week should be to start averting a train wreck.

The top guys – President Obama, USTR Froman, five EU member state heads of state, EU trade Commissioner Malmström – are meeting in Hannover, among others to try to break the current deadlock in TTIP. Meanwhile in New York, the grey-suited bureaucrat-negotiators of USTR and the EU Commission will work their way forward on the huge paperwork during a thirteenth round of talks that starts today (Monday 25 April). Their ambition is no less to double the number of ‘joint texts’ in TTIP in the coming days.

TTIP – victim of public anger at political establishment

TTIP’s chances of success were low to begin with. Previous attempts to advance transatlantic trade and investment talks never got off the ground: be it the Multilateral Investment Agreement in the OECD in the late 1990s, the frequently unsuccessful attempts to foster regulatory cooperation in the industrial sector to reduce barriers to trade started in the 1990s, or the ill-fated TEC of 2007.

Anti-Americanism has been deeply ingrained in centre-left circles across the EU. In Germany anti-US sentiment has been rising (though fading in France). Right-wing populism is gradually replacing centre-left ideology in rejecting an economic alliance with the US. Austria, the country that most rejects TTIP – more than Germany – in the EU has just seen a right-wing populist politician lead in its presidential polls, followed by an ex Green Party leader and TTIP-critic as second contender.

It took the 2008 economic and financial crisis, the EU’s geopolitical crisis with Russia, and the conclusion of the TPP by the US to change the calculus for a transatlantic deal in the EU and in the US. But the crisis in the political and traditional party systems pervasive across the West is proving a destructive force. The occasional effort of a largely discredited political establishment across the Atlantic to do policies that are rational and forward-looking – to which I personally include TTIP – just can’t withstand the force of popular anger.

Public opinion in Europe, perceived as highly critical of TTIP, has been more on board the project than many suggest. Overall a majority of polled Europeans remains in favour of the deal according to Eurobarometer polls. Surprisingly Germany has revealed to itself to be the outlier with a majority of Germans against TTIP.

But public opinion support for TTIP has been on a downward path since last year. While in the US TTIP was hardly known in public opinion and generally seen more favourably than TPP, this has changed. A Bertelsmann Foundation poll published late last week shows that only one in five Germans believe TTIP is a good thing for Germany, with one in three Germans rejecting TTIP outright. In the US, only fifteen percent of the polled support TTIP.

The EU’s attempts to salvage the deal by increasing transparency, by pulling a (botched) reform of international investment arbitration out of the hat to respond to a public outcry against the practice, by engaging the EU Parliament, by sending a friendly face – Commissioner Malmström – to the member states to pitch TTIP, have come to nil.

Angela Merkel, Germany’s Chancellor has been pitching TTIP to the German public, underlining how important it is for jobs, growth and security. Despite her popularity at home this was also to no avail. Britain has been largely absent from the EU-wide debate on TTIP as it is navel-gazing and focusing on its high-risk referendum on EU membership. Whether the recent rebuff President Obama gave to UK Eurosceptics who think their country’s ‘special relationship’ with the US could lead them to a fast road to a separate trade deal will contribute to halt the rising tide of supporters of the Out camp remains to be seen.

Always second in line after TPP

In the US, TTIP is falling victim to the TPP. The US administration has spent most of Obama’s second term negotiating the complex transpacific pact with 11 other countries. It is now struggling to get it through Congress.

After having been absent-minded in the first two years of TTIP negotiations, now suddenly the Obama administration wants to ram through the deal. “The time to complete TTIP is now. I am here to say that the United States is prepared to make every effort to reach an ambitious, comprehensive, and high standard agreement this year”, President Obama said at the opening ceremony of the Hannover Messe in Germany on Sunday (25 April 2016).

Europeans are irked by this attitude. First they felt neglected and ignored by US negotiators who were absorbed by the heavy task of TPP. Only once that deal was done in the summer 2015, did they start paying more serious attention to TTIP. At the stage at which the negotiations are now – barely managing to make significant breakthroughs beyond basic import tariff eliminations and a little more talking between regulators, Europeans sense that they would get a bad deal from the US if they just let Washington get its way.

Business, including US business groups like the US Chamber, have highlighted the risks of hurrying up to the detriment of a well thought-through, commercially meaningful deal that really raises the standards of economic rule-making at the global stage.

If the TTIP is to be what it was initially meant to be, it cannot be reasonably finished in 2016. In fact, the real talking has barely begun. Why nip it in the bud? Opening up public procurement markets, advancing a framework for fruitful regulatory cooperation, significantly open services markets: all these issues will need the time they need to be worked out. If TPP took five years to conclude, why should TTIP take only three, given its inherent complexity?

The US is in no position to respond to key EU market access demands in say procurement or services in an election year as Congress would just refuse to budge. Washington has also not been in any way helpful in engaging Federal states to induce more of them to sign on to a few disciplines on public procurement to allow for European bidders to contribute to improving on the dire state of US infrastructure.

EU leaders for their part deluded about what they can achieve in TTIP. In a statement released this weekend, French secretary of state Mathias Fekl and German economy minister Signmar Gabriel issued a new maximalist laundry list of demands to the US, ranging from accepting EU-style geographical indications to progress in procurement and services, and concrete breakthroughs in regulatory cooperation in a range of sectors. They also want an energy chapter, and, of course, see the US sign on to the EU’s brand new Investment Court System, which both have contributed to writing. They also want to see high standards in labour and environment.

European leaders will have to understand that they just won’t get everything from the US. Not least if the French agriculture ministry continues to insist on maintaining beef and grain quotas on US imports instead of agreeing to a full phase out of tariff and quotas as asked by the US.

The best both sides can achieve this year is indeed to try to have an advanced common text, to agree to a few key compromise areas on a few meaningful sectors – services, regulation, and procurement in particular – next to a tariff deal, then put TTIP in a deep freeze in the second half of 2016.

Under a potential Clinton administration, if the initial skeleton of TTIP is well constructed enough, both sides could envision starting to put some flesh onto it in 2017 and sort out final matters such as investment protection or the labour and environment chapter and broker the final compromises in services and procurement.

This kind or approach would probably be the best way to avert what TTIP is threatening to become: an utter trainwreck. Assuming the EU and US as we know them still exist next year.